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Re: Junk stocks don't care if a debt is unsecured or secured""The ratings agency found that nearly two-thirds of companies that conclude such an exchange will default within one year."" the beginning of March, 77% of leveraged loan default volume has come from metals/mining and energy companies. While the institutional rate for the trailing 12 months was 1.4% at the end of July (unchanged in four consecutive months), the rate for metals/mining firms rose from 4.5% to 8.1% following the bankruptcy filing by Walter Energy in mid-July. The default rate for energy companies at the end July was 3.1%, and the overall default rating would have been just 0.5% were it not for the bankruptcy of the operating unit of Caesars Entertainment. The data come from a report on leveraged loan default rates out Friday from Fitch Ratings. The agency’s senior director of leveraged finance said:
Here are some other data points from Fitch:
Earlier this month, Fitch issued a report on distressed debt exchanges similar to the ones done by both Walter Energy and Alpha. The ratings agency found that nearly two-thirds of companies that conclude such an exchange will default within one year. That is not good news for either Arch Coal Inc. (NYSE: ACI) or Peabody Energy Inc. (NYSE: BTU), nor the investors who have bid the stock up to recent highs. Arch is expected to announce results of its debt swap that was extended for two weeks as the company was believed to be trying to come to terms with creditors who oppose the proposed swap. Arch stock traded up nearly 13% in the noon hour Friday, at $7.94 in a 52-week range of $1.00 to $31.70. Peabody’s stock was up about 6.5%, at $2.43 in a 52-week range of $0.99 to $15.94, after jumping about 30% on Thursday. Read more: Leveraged Loan Default Rate Soars on Coal Miner Bankruptcies - Arch Coal, Inc. (NYSE:ACI) - 24/7 Wall St. http://247wallst.com/energy-business/2015/08/28/leveraged-loan-default-rates-soars-on-coal-miner-bankruptcies/#ixzz3kAV0fYzh Follow us: @247wallst on Twitter | 247wallst on Facebook |
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